Question

On May 1, 2015, Brinker International purchased $369,000, 11% bonds, with interest payable on January 1...

On May 1, 2015, Brinker International purchased $369,000, 11% bonds, with interest payable on January 1 and July 1, for $328,200, INCLUDING accrued interest. The bonds mature on August 1, 2023. Amortization is recorded using the straight-line method and the bonds are classified as trading. On December 31, 2019, the bonds were adjusted to their proper carrying value when their fair value was $380,717.

Assuming the bonds were sold on July 1, 2020 for $401,507, PLUS accrued interest, determine the gain or loss on the sale of the bonds?

(Note: Round the answer to the nearest whole dollar. Accrue interest and amortize premium/discount on a monthly basis. If a gain results, enter the answer as a positive number. If a loss results, enter a minus sign '-' prior to the amount of the loss.)

**Please show steps

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Homework Answers

Answer #1
Accrued Interest $13,530
369000*11%*4/12
Bond payment without accured interest
328200-13530 314670
Par value $369,000
Less: bond price $314,670
Discount amt $54,330
No. of months
(may 1 2015-Aig 1 2023) 99
Discount amortized per month $549
Discount amortized till Dec 31 2019
549*(8 months+(12*4)) 30744
Book value (314670+30744) $345,414
Carrying value is 380717
Unrealized gain $35,303
On July 1 2020
Sales price $401,507
Less: Carrying value 380717
Gain on sale of Bonds $20,790 ans
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